Bitcoin (BTC +1.96%) and Ethereum (ETH +1.79%), the world's two most valuable cryptocurrencies, both turned their early investors into millionaires and even billionaires. A $1,000 investment in Bitcoin's first publicly recorded trade in 2010 would be worth about $40 billion today.
That same investment in Ethereum's first trade in 2015 would be worth nearly $6 million. But could either of these blue chip cryptocurrencies churn a fresh $1,000 investment into more than $1 million within the next two decades?
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The differences between Bitcoin and Ethereum
Bitcoin is mined with an energy-intensive proof-of-work (PoW) mechanism that requires miners to validate transactions by solving complex cryptographic puzzles. They earn rewards, which are paid out in Bitcoin, for cracking those puzzles with powerful computer systems.
Bitcoin was once mined with computers using CPUs and GPUs, but every four years a scheduled halving cuts its mining rewards in half. That rising difficulty makes it harder to mine Bitcoin for a profit, and it can only be mined with powerful application specific integrated chips (ASICs) today.
Bitcoin has a maximum supply of 21 million coins, and 19.9 million of them have already been mined. The final Bitcoin is expected to be mined in 2140. That scarcity makes it more comparable to gold, silver, and other hard commodities.
CRYPTO: BTC
Key Data Points
Ether is the native cryptocurrency of the Ethereum blockchain. It was once mined with the PoW mechanism like Bitcoin, but it transitioned into a more energy-efficient proof-of-stake (PoS) token in 2022. As a PoS blockchain, the coins are no longer mined. Instead, they can only be staked, or locked up, on Ethereum's blockchain to earn interest-like rewards. The blockchain is used to support smart contracts, which can be used to develop decentralized apps (dApps), non-fungible tokens (NFTs), and other crypto assets. Ethereum's early mover advantage in that sector turned it into the biggest and most active developer platform for dApps.
Ethereum has a circulating supply of 120.7 million coins, but some of that is burned off (permanently removed from circulation) with each transaction as a gas (user) fee. So if its network activity increases, the supply can shrink as more coins are burned than issued. But if its network activity decreases, the supply increases as more coins are issued than burned. Therefore, Ethereum is usually valued by the size of its developer ecosystem than its scarcity.
CRYPTO: ETH
Key Data Points
The Securities and Exchange Commission approved the first spot price exchange-traded funds (ETFs) for Bitcoin and Ethereum last year. Those new ETFs should draw in more retail and institutional investors while reinforcing their reputations as the safest blue chip tokens.
The upcoming catalysts and challenges
Bitcoin could gain further momentum as it's adopted by more companies, institutional investors, and even countries as a hedge against inflation. It could also be used for more mainstream payments and cross-border transactions. Its tightly controlled supply could make it a compelling alternative to gold and other traditional safe assets.
Ethereum's Layer-1 (L1) blockchain faces intense competition from faster and cheaper PoS blockchains like Solana (SOL +0.63%), but its Layer-2 (L2) networks -- which are built on top of its L1 blockchain -- can process those transactions at faster and cheaper rates. As for its L1 blockchain, its planned network upgrades -- The Verge, The Purge, and The Splurge -- should boost its scalability, reduce its congestion and gas fees, and improve its overall efficiency.
The bulls believe Bitcoin and Ethereum still have plenty of room to run. Ark Invest's Cathie Wood expects Bitcoin's price to surge about 1,900% to $2.4 million by 2030, and for Ethereum's price to surge more than 3,600% to $166,000 by 2032. We should take those rosy estimates with a grain of salt, but they suggest that Bitcoin and Ethereum could potentially turn a fresh $1,000 investment into $20,000 and $37,000, respectively, during the next five to seven years.
But which token is more likely to be a millionaire-maker?
Even if Bitcoin and Ethereum hit Wood's lofty price targets, they won't come anywhere close to replicating their past millionaire-making runs. But they might still turn bigger investments of $10,000 or more into $1 million during the next few decades.
It's impossible to tell exactly where Bitcoin and Ethereum will end up in the distant future. But if I had to choose one as a potential millionaire-maker over the other, I'd pick Ethereum -- since it trades at less than a quarter of Bitcoin's market cap, is scheduled for some major network upgrades during the next decade, and will directly benefit from the growth of the nascent dApp market.
Bitcoin's value should also keep climbing over the long term, but its gains could eventually slow as it's more frequently bought as a hedge against inflation and becomes more similar to gold and other precious metals.
